White House reaches informal deal with Boeing for Air Force One

WASHINGTON (Reuters) – U.S. President Donald Trump has reached an agreement with the Boeing Co (BA.N) to provide two Air Force One planes for $3.9 billion, the White House said on Tuesday.

“President Trump has reached an informal deal with Boeing on a fixed-price contract for the new Air Force One Program,” Deputy Press Secretary Hogan Gidley told Reuters. He said the contract will save taxpayers more than $1.4 billion, but those savings could not be independently confirmed.

Trump has said Boeing’s costs to build replacements for Air Force One aircraft – one of the most visible symbols of the U.S. presidency – were too high and urged the federal government in a tweet to “Cancel order!”

The Boeing 747-8s are designed to be an airborne White House able to fly in worst-case security scenarios, such as nuclear war, and are modified with military avionics, advanced communications and a self-defense system.

“President Trump negotiated a good deal on behalf of the American people,” Boeing said in a news release.

U.S. aerospace analyst Richard Aboulafia said the White House was engaging in “political theater.”

“There’s no evidence of a discount,” said Aboulafia, vice president of analysis at Teal Group.

Earlier this month, the Pentagon released Air Force budget documents for fiscal year 2019 disclosing the $3.9 billion cost for the two-aircraft program. The same 2018 budget document, not adjusted for inflation, showed the price at $3.6 billion.

Boeing would only have so much room to offer discounts given the high proportion of supplier content on Air Force One, from refrigerators to missile warning systems, Aboulafia said by phone.

The big U.S. defense contractor said the deal includes work to develop and build two planes, including unique items such as a communications package, internal and external stairs, large galleys and other equipment.

The “informal deal” will need to be codified in a formal contract with comprehensive, complex terms and conditions said Franklin Turner, a partner specializing in government contracts at law firm McCarter & English, suggesting a final deal was still a ways off.

Boeing stock was up 1.4 percent at $368.54, trading at an all-time high.